A calmer Asian session this Tuesday, as the dust settled over Monday’s US-China trade optimism. The Asian equities tracked the Wall Street rally while positive developments around the US-Japan trade deal also kept the sentiment buoyed.
The Japanese currency emerged the strongest across the fx space amid US-Japan trade deal hopes. Therefore, USD/JPY was downed about 0.40% to 105.65 region. The drop in Treasury yields and the greenback also exacerbated the pain in the major. The Antipodeans felt the pull of the gravity once again, despite a broadly weaker US dollar and upbeat Chinese industrial profits data. The Aussie fell further to near 0.6750 region on the Reserve Bank of Australia’s (RBA) Deputy Governors Debelle’s somewhat dovish comments on the interest rates. Meanwhile, the Kiwi suffered the most, after having faced rejection at the 0.6400 level, as the Yuan sell-off outweighed positive oil prices. Gold prices traded modestly flat below 1530 levels, with risks titled to the downside amid improved risk tones.
Ahead of the European open, both the EUR/USD and Cable remain on the back foot, in the face of the Italian and Brexit political uncertainty.
Main Topics in Asia
US Pres. Trump: Ready to meet Iran’s president to solve nuclear impasse – Reuters
UK PM Johnson to send Chief Brexit adviser David Frost to Brussels on Wednesday – The Telegraph
RBNZ’s Orr: 50-point cut was driven largely by domestic concerns – AFR
PBOC governor called on major financial institutions to speed up issuing new loans – Xinhua
WTI technical analysis: Bulls find short term relief while bears eye $52 handle
PBOC sets Yuan reference rate at 7.0810
Australian PM Morrison: Ready for a trade deal with UK within a year of Brexit
China’s industrial profits rebound 2.6% y/y in July, Aussie uninspired
The Nikkei is tracking the Dow’s every move
Japan’s Aso: Stability of exchange rate is important
Japan’s Motegi: We have agreed with the US to create a balanced deal
USD/CNY jumps to highest since February 2008
RBA’s Debelle: Threats to free trade system pose “significant risk”, Aussie unfazed
RBA’s Debelle: Floor for rates is likely around zero to 0.5%
Gold technical analysis: Gravestone Doji indicates scope for a deeper pullback
Key Focus Ahead
Today’s EUR macro calendar remains a thin showing, with the only German Final Q2 GDP figures of note, dropping in at 0600 GMT. Later at 0830 GMT, the UK BBA Mortgage Approvals data will be reported, which is unlikely to have any impact on the pound. However, the speeches by the Bank of England (BOE) policymaker Tenreyro and European Central Bank (ECB) Vice-President De Guindos will be closely eyed at 1200 GMT for fresh hints on the monetary policy outlook, in light of growing Brexit uncertainty and increased hopes of ECB stimulus.
In the NA session, the US Conference Board (CB) Consumer Confidence data, due at 1400 GMT, will headline among other minority reports while oil markets eagerly await the American Petroleum Institute (API) Weekly Crude Oil Stock data slated for release at 2030 GMT.
Meanwhile, the focus will continue to remain on fresh US-China trade headlines and the US President Trump’s comments among Brexit and Italian political developments.
EUR/USD: Bullish reversal remains elusive ahead of German GDP
EUR/USD remains on the defensive, as the pair fell 0.34% on Monday, invalidating Friday’s bullish outside reversal candle. The common currency may come under fresh pressure, if the German GDP prints below estimates, strengthening the case for aggressive easing by the European Central Bank.
GBP/USD remains under pressure as Brexit uncertainty intensifies
With the increasing odds of a no-deal Brexit, GBP/USD remains on the back foot while heading into Tuesday’s London open. UK’s Chief Brexit adviser David Frost will head to Brussels for fresh departure talks on Wednesday.
Italy: Talks between Five Star and Democrats to continue on Tuesday – ANSA
Bloomberg reported the headlines from the Italian news outlet, ANSA, earlier today, citing that the talks between ruling 5-Star Movement and the opposition Democratic Party on the coalition will continue on Tuesday.
Euro-zone economy: New German government needed to spend and lift the euro
Germany is on the verge of a recession and may take the whole euro-zone with it. Monetary stimulus by Draghi and later Lagarde may be insufficient. A change of guard in Berlin may be needed for a significant difference. The euro may continue suffering until then.
US Conference Board Consumer Sentiment Preview: Jobs, jobs, jobs
Consumer confidence forecast to decline but remain buoyant in August. Labor market strength continues to support consumer optimism. Trade conflicts and tariffs have yet to damage consumer sentiment.
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